F1-M2: EPS and Public Company Reporting Topics

Question 1

What is the basic formula used for calculating EPS?

Answer 1

(Income available to common shareholders) /
(Weighted avg # of common shares outstanding)

Question 2

Name the potentially dilutive securities or instruments.

Hint: 4 items

Answer 2

• Stock options and warrants and their equivalents
• Convertible seucrities (bonds or preferred stock)
• Contracts that may be settled in stock or cash
• Contingent issuable shares

Question 3

Compare basic and diluted EPS.

Formulas

Answer 3

Basic: Simple capital structure (only common stock outstanding)
Diluted: Complex capital structure